Unlike other lawyers, family business lawyers are trained to understand the emotional overlay of what might otherwise be a garden-variety dispute within a private company. This allows them to offer professional advice and judgment, unclouded by the personal context of the situation.
Creating governance policies for areas like education of family members, distribution of family wealth, and philanthropy is another critical area that can benefit from a family business lawyer.
A family business lawyer can help you set up a shareholders agreement to protect your interests as a business owner. The document covers everything from voting rights to rules regarding share transfers. It can also help minimize disputes between family members. Dysfunctional relationships between family members are often the root cause of disagreements in a family business. Resentment can cloud judgment and prevent critical discussions. In addition, a lawyer’s ethical obligations are more complicated when representing family businesses.
Keeping personal and business matters separate is crucial for a family business’s success. A family business lawyer can help you with legal issues, including establishing different bank accounts, credit cards, and tax filings. They can also help you create a family constitution or charter. This non-legally binding agreement defines your family’s goals, roles, structure, and policies for managing the family business and wealth. A family business lawyer can help you develop long-term solutions to potential disputes, like mediation. In short, they help you keep more money in your business and avoid costly litigation.
Family business law in Texas requires a lawyer who is more than a trusted advisor. They are also problem solvers, keepers of secrets, and deep listeners with a unique sensitivity to the challenges, goals, and values common to most family businesses.
A successful family business has two intertwined systems: the family and business systems. Sometimes, events or dynamics in one system significantly impact the other, as was seen with the infamous Gucci feud between Maurizio and Patrizia Gucci or the influence of in-laws upon British royalties.
A valuation is required when a family business owner passes their interest to another. It’s essential to have a lawyer who understands the complex financial issues involved in valuing a business. Often, an equity interest’s value is determined by multiples applied to past profits, future income, or market comparisons. However, these methodologies have flaws, and an inexperienced family business lawyer can miscalculate the value of your business interest. This could be very costly.
In addition to regulatory compliance, compensation and equity incentives for family members and non-family employees, and disability and retirement planning, a family business lawyer can offer advice on succession planning. This is an essential aspect of the practice, given recent case law demonstrating how difficult it can be for shareholders in a family-owned business to force a “business divorce.”
Family business owners often need help with the complexity and scope of the process to construct a business succession plan. At the outset of representation, counsel can provide a blueprint that breaks the planning into separate projects and milestones. This makes the process more manageable, efficient, and rewarding for the clients.
A good family business lawyer can assist in developing a family constitution (often referred to as a family charter or a family business agreement). This document establishes goals, roles, structure, policies, and protocols for managing the family business and wealth. It is a powerful tool that mitigates conflict and facilitates clear communication among the family and business stakeholders.
The 24 million family-owned businesses in the United States generate 64% of our country’s gross domestic product and employ 82 million people. Unfortunately, many family business owners fail to address succession planning adequately and timely. This often leads to conflicts between family members who may want to run the company after the founder’s death or incapacitation.
An estate plan can help ensure the transfer of family-owned assets according to the owner’s wishes. This can include setting up a buy-sell agreement, reducing tax liabilities, and protecting assets from creditors or long-term care costs.
Family business lawyers often serve as trustees or fiduciaries for family-owned businesses and provide personal estate planning for the owners and their families. These multiple roles and responsibilities can create ethical complications. Attend this program to learn about the key issues facing attorneys representing family businesses and their beneficiaries. We will discuss the most common ethical pitfalls and how to avoid them by carefully considering the scope of representation, narrowing the model where possible, or obtaining informed consent from the affected clients.
Eventually, every business comes to the point where it no longer makes sense to continue operations. This may be due to financial or other reasons. When that time comes, it is necessary to close the business, also known as dissolution. The process is not without complications, particularly if the company has ongoing contract obligations that must be fulfilled. Failure to follow the proper procedures can result in unintended consequences, such as personal liability.
A family business lawyer can help with the dissolution process by reviewing contracts and filing requirements. They can also assist with obtaining creditor claims and notify creditors or claimants of the company’s intention to dissolve. Some states require notice to known claimants, while others allow the company to publish its dissolution in a local newspaper.
Family businesses have unique challenges that familial dynamics can magnify. A family business lawyer can be a valuable asset to the owner as they work to ensure a successful transition from one generation to another. They are more than just document creators – they are trusted advisors, problem solvers, and deep listeners.